Africa is a complex market with varying market demands for growth. In the last century, Africa has borrowed from economic models from around the world, with a confluence of all existing models.
Some have termed this as Africapitalim. Africapitalism in countries such as Nigeria, Mozambique, Rwanda, Angola and Kenya is seen as the solution to creating inclusive African societies and less of a reliance on AID, to push the development agenda. Africapitalism is the economic philosophy that, African private sector has the power to transform the continent through long-term investments, creating both economic prosperity and social wealth.
Africapitalism has also added to the resurgence of indigenous funding mechanisms based on private sector driving indigenous growth. Africapitalism is a model that has the potential to change the way Africans invest in one another, and how they bring the informal to the formal through identifying unique indigenous African business cases. The Economist, had the following to say about the impacts of Africapitalism in an extract from its article,
The Rise of Africapitalism: “In 2015 the African entrepreneur will emerge on to the global stage, as a new generation shows the world what those of us doing business in Africa have long known: that our continent is home to some of the most exciting and innovative entrepreneurial talent. The term “Africapitalism” describes the process of transforming private investment into social wealth. As homegrown businesses meet social and economic needs by creating goods and services with an innate understanding of the local environment, they can bring private capital to vital infrastructure like road transport and power generation. And they can create jobs for Africans, which will in turn create an African middle class—a new generation of African consumers”.
Nigerian philanthropist, private investor and former banker Tony O. Elumelu first iterated the term Africapitalism in 2011, which has been likened to concepts including “inclusive capitalism“, “impact investing,” “conscious capitalism” and “philanthro-capitalism”. The tenants of Africapitalism according to the Toni Elumelu Foundation are:
- Entrepreneurship. Unlock the power of individuals to create and grow their business ideas into successful companies
- Long-term Investments. Deploy patient capital that creates greater and broader economic value as opposed to merely the extraction of resources
- Strategic Sectors. Invest in sectors delivering a financial return as well as broader economic and social value – agriculture, power, healthcare, and finance
- Development Dividend. Conduct investments and business activity in a manner that delivers financial returns to shareholders as well as economic and social benefit to stakeholders
- Value-Added Growth. Leverage locally available human and financial capital, raw material and other inputs that create longer, more integrated, and higher value regional supply chains
- Regional Connectivity. Facilitate intra-regional commerce and trade through the development of national and cross-border physical infrastructure, and the harmonization of policies and practices
- Multi-Generational Development. Focus on investments and economic growth strategies that build value for future generations
- Shared Purpose. Foster collaboration between businesses, investors, governments, academia, civil society, philanthropists, and development institutions to create conditions that will empower the African private sector to thrive
Africapitalism as a new mode of investment seeks to meet the challenges of a dynamic and complex African environment. Investors in Africa must take into account the local challenges. It is in understanding the way that indigenous markets grow and also finance themselves that Africapitalism will become the new dominant form of social impact investing in Africa.
Africapitalsm is as much about formalizing African business as it is about creating new and innovative businesses that respond to the African development challenge.
Africapitalism cannot exist in Africa without intervention from African governments. This is through the creation of environments necessary for private indigenous industry to exist. However in Africa, it is important for Africapitalism to be state sponsored as much as it is state managed to ensure that those whom are most disadvantaged feel its effects.
African governments need to start identifying African innovation in the informal spaces, in order to fund and document it and allow it to become part of the formal African development story that is truly reflected in national statistics. The informality of the African markets has been a response to historical economic systems that have excluded the African. Therefore it is no wonder in Africa there a mixture of the four types of capitalism: State Capitalism, Welfare Capitalism, Oligarchy Capitalism and Entrepreneurial Capitalism which all form the basis for Africapitalism.
All of them happen at same time in Africa and sometimes in opposition to one another in diverse and complex African market.
It should be noted however, though not called Africapitalism, indigenous African economic participation using the private markets has been around for more than a century. Africans have always found innovative ways to participate in the private markets because they were historically disenfranchised in their own societies.
The mere fact that it is being coined now also alludes to the fact that international capital formations should also react differently to the African story and how to invest in Africa, whilst creating maximum social impact. Investing in Africa should be driven not only by the idea to make good economic returns, but it should also be driven by a new social compact that is underpinned by Africapitalism.
This social compact should seek to change the fortunes of African nations through indigenization of financing and also sustainable investment. Developing Africapitalism means that private investment in Africa should have a social conscious in that it should be keenly aware of the problems in society and must seek to alleviate some of the pressing social issues that exist on the African continent.
Africa will through its own indigenous ways of engaging the market begin to create new opportunities in the market place for the ordinary African that will bring about a paradigm shift in how we view ethical investment on the African continent.
Africapitalism can form a new investment methodology for Africa if managed properly and tailored to the local needs. This is turn will lead to small business entrepreneurism using the foundations of Africapitalism becoming the lifeblood of the next stage of African development, and innovation in the continental marketplace.
By Dumani Mandela
Dumani serves as a Director at OSR Holdings (Pty) Limited. He is the grandson of former president Nelson Mandela.